2016 Goal: I Wanna Be a Millionaire So F***kin’ Bad (How to Start and Track Progress)

Creating a SALN is basically listing down what you own, what you owe, and the difference is your net equity, or in the language of taipans and the world’s richest, your net worth. Again, it does not have to be as accurate as auditors and BIR would have it since it shall be for your personal use. You just need an Excel file and the discipline to manage and track your finances — which is for your own good anyway.

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Happy New Year! Excited for what’s in store for every Juan this 2016!

Most of us will surely have new year resolutions or goals. And some would probably have something to the tune of:

I want to be a millionaire this year.

Or become a millionaire by my 30th birthday, something like that. Nothing wrong with this goal. But what I realized, and asked my self more than 2 years ago, is that, how does one measure becoming a millionaire financially.

Or the most basic question really is, how do I know if I’m making progress towards my financial goals? Especially now that it’s a new year, a new start for all of us.

I’m reiterating in this post that Juan should create a personal statement of assets, liabilities and net worth (SALN). I wrote about this more than two years ago, the basics of creating Juan’s SALN and I shall be stressing it now once again, to encourage Pinoy’s to start the year right.

Surely, it’s easy to tell that Juan is a millionaire if s/he has at least PHP1M in his/her bank deposits. But how many of us have that? If I don’t have PHP1M, does that mean I’m not a millionaire?

How about my other assets? Or what if I indeed have PHP1M in my bank account but I also have a loan of PHP1.5M — am I still a millionaire? How many of us ask these questions to ourselves?

Creating a SALN is basically listing down what you own, what you owe, and the difference is your net equity, or in the language of taipans and the world’s richest, your net worth. Again, it does not have to be as accurate as auditors and BIR would have it since it shall be for your personal use. You just need an Excel file and the discipline to manage and track your finances — which is for your own good anyway.

And believe me, it gives you more peace of mind than tracking your savings (or loans) separately. It also becomes addicting to the point that you become extra aware and judicious before you spend your money.

1. Liquid CashHow much is in your savings and checking accounts. May also include your emergency funds.2. Long-term CashHow much you have on high yield time deposits, T-bills, bonds and other equivalents. I also prefer to include here savings in AFPSLAI / PSSLAI, if any, since it has higher yields and I prefer to keep them long-term.

The market value of the house and lot (and/or condominium) you own (mortgaged or otherwise). You may also depreciate / appreciate its value over time. You may also include here the value of major appliances / properties inside the house if they have good resell value (antique, paintings etc, but personally I don’t do this).

If the condo is still pre-sell, then Juan can count as asset the cumulative down payment s/he has paid. Once turned-over, the whole value of the condo may be counted as asset, but a mortgage loan (if any) shall be accounted for as liability.

9. Vehicles ValueThe market value of the vehicle/s that you own. This one is usually depreciated over time (e.g. 10 years).10. Land ValueIn case you have other properties, the market value of these. If market value is hard to determine, purchase value might also be a conservative estimate.

Note that I don’t usually include appliances / gadgets etc. Personally I don’t want to have the mindset that buying these items increases my net worth. Yes these are all important and useful, but in my books, they count as necessary expenses and not assets.

LIABILITIES1. Credit Card BalancesThis one is important because usually, when we swipe to shop, we tend to forget how much we already owe. Tracking this also encourages Juan to pay the whole balances and not just the minimum amount due.

2. Short Term LoansBalance of other unsecured loans you may have, especially those with less than or equal to 12 months loan tenor.

3. Long Term LoansBalances of other loans with loan tenor longer than 12 months. SSS loan, Pag-Ibig Loan and other bank loans may go here.

4. Insurance PayablesSince we are counting insurance fund value and sum assured as assets, insurance payable must be rightfully treated as liabilities since if we don’t pay this obligation (e.g. 10 years), then our policy might lapse and we will not have above-mentioned assets.

5. Mortgage LoanDid you take out a mortgage loan to get a house and/or condominium? Then these shall be counted as liabilities for us to enjoy the above listed assets.

6. Auto LoanSimilarly, if you took out an auto loan to get that dream car of yours you call asset, then this liability should be accounted for. The trick here is to ensure that the repayment of the auto loan balance is faster than the depreciating asset / car value.NET WORTH

Caveat, below definitions of various net worth are developed by Investment Juan01 and such definitions work well with us. Again, tweak it as applicable to your finances.

1. Total Equity / Net Worth (NW)

Computed as

Total Assets less Total Liabilities

Basically, this says how much of what you own was paid for by your own hard-earned money and not via credit. This number may surprise you and be unbelievably big since even the insurance sum assured is included here.

2. Living Net Worth (LNW)

Computed as

(Total Assets less Life Insurance Sum Assured) less

(Total Liabilities less Insurance Payables).

This removes the insurance components in both assets and liabilities side. I call it living net worth since this is how wealthy you are while still alive. Note that insurance fund value is counted here 100% since you own that amount even prior to death.

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Founder and main author. Husband, used-to-be-breadwinner, God-made multi-millionaire, employee, financial planner and adviser, investor, stocks trader, entrepreneur, agri-preneur, book author. Firm believer that all Pinoys deserve a richer life. Not a guru, but a forever student of the investments world, a work-in-progress.

8 Comments on 2016 Goal: I Wanna Be a Millionaire So F***kin’ Bad (How to Start and Track Progress)

Personally I don't include my payroll account in my SALN because I almost always zero it out, and it's always a diminishing balance until the next payroll. So in this sense, my SALN is slightly understated.

As soon as payroll comes in, I withdraw a significant amount and transfer to my other bank accounts (which are counted in my SALN).

I track my expenses separately (which is pretty much what the payroll account is for) but remember the SALN is a snapshot of what you own and owe, so it does show you your cash in flows and outflows.

Yup. So that if ever a buy a new phone, it hurts me so much on the asset side (less cash) or liabs side (more card balances) which as negative impact on my NW. That way I really convince my self whether I have to buy those stuff.

Nice work. If you know where you are (your assets minus liabilities), you'd know how far you need to go (digging out of debt and into the Million) and how fast you'll get there based on your current income.

Note: Not including gadgets, etc. is a nice touch. I don't consider those as “assets” as well since they depreciate to nothing in a few years.

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